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My understanding of heat pump operation in the heating mode is that the function of the evaporator and condensor are reversed from that of a standard AC system, and therefore the flow is reversed in the refrigerant lines.

Shouldn't the liquid line be insulated in a HP system then to extract the maximum amount of heat in the indoor coil which is now acting as a condensor? It seems that some HP installation manuals specifically state that the liquid line remain uninsulated, and some only talk about vapor line insulation?

When a heat pump is in heating mode, the compressor's high pressure discharge, along with the attendent superheat, is carried indoors through the vapor line, which of course is insulated. The liquid line is only carrying heat that the condensor (indoor coil in heating) did not remove. Heat losses to ambient are now a benefit since it increases the amount of heat that the outside coil can absorb (slightly).